Markets surge despite dour data

Markets are on the rise despite a host of worrying data last week. Oil prices are in focus, as hopes of a Russia-Saudi deal grow.

• European stocks surge despite disappointing data.

• Easing mortality rates raise hopes of a shorter lockdown.

• Crude volatility ahead, as Russia and Saudi Arabia close in on a deal.

European markets have kicked off the week in impressive fashion, with the FTSE 100 seeing the first weekend gap higher since the selloff began back in February. Coming off the back of a week which saw huge declines in payrolls and a record-breaking spike in initial jobless claims, the current outperformance highlights the relatively robust nature for stock markets compared with the weeks gone by. Today’s gains have provided a huge boost for some of the more beleaguered stocks, with housebuilders and travel companies finally gaining ground despite huge concerns in the face of the coronavirus. With a decline in daily mortality rates across the likes of France, Italy, and New York, we are seeing some optimism that the current restrictions could be shorter than many had previously speculated. However, without a cure or vaccine, any easing on the current restrictions would likely short-term in nature, sparking a likely surge in cases before long. 

Oil price volatility is likely to dominate the week ahead, with the initial 5% gap lower seen overnight ultimately being recovered as optimism grows over a deal to cut production. The involvement of G20 countries looks to be a key factor in getting a deal across the line, which provides a potential stumbling block for when discussions go ahead. The decision to push back this week’s meeting highlighted the ongoing rift between Russia and Saudi Arabia, yet rumours that a deal could be ‘very close’ is helping to bolster prices ahead of any announcements. What is clear is that any production deal would fall short of the huge slump in demand expected in the months ahead, with Goldman Sachs seeing a decline of 26 million barrels per day being struck off global demand. Nevertheless, while oversupply is inevitable in any case, the huge 15 million bpd production cut touted by Trump could at least help lift prices for the short-term.

Ahead of the open we expect the Dow Jones to open 813 points higher, at 21,866.